UK’s FCA Pushes Forward on Stablecoin Oversight With Public Consultation

The UK’s Financial Conduct Authority (FCA) has unveiled its most comprehensive plan yet to regulate stablecoins and crypto asset custody, signaling a decisive step toward establishing a formal legal framework for digital assets.

In a consultation paper released Tuesday, the FCA introduced draft rules requiring stablecoin issuers to maintain fully backed reserves with independent custodians and ensure token holders can redeem assets at face value by the next business day. These measures aim to instill greater transparency, bolster consumer protections, and mitigate risks in a fast-growing, yet largely unregulated sector.

"For stablecoins to serve as a reliable means of payment, users need strong protections," the FCA wrote in the paper. The regulator emphasized that these proposals will help make digital payments safer and more dependable.

David Geale, executive director for payments and digital finance at the FCA, underscored the balancing act regulators face: “Crypto remains largely unregulated in the UK. We’re looking to back innovation, but not at the expense of market trust.”

The initiative reflects a broader push by UK authorities to strengthen market safeguards after a wave of crypto sector collapses highlighted systemic weaknesses, particularly in asset custody and reserve management. The FCA is also collaborating with the Bank of England to design a parallel regime for stablecoins that could impact national financial stability.

Deputy Governor Sarah Breeden of the Bank of England noted, “For stablecoins operating at systemic scale, we’ll outline a parallel regime,” confirming that the central bank will issue its own consultation later this year.

In addition to stablecoin provisions, the FCA has also proposed new responsibilities for crypto custodians. The regulator’s discussion paper sets expectations for how these entities manage customer assets, mandating continuous access and stronger safeguards in the event of firm insolvency.

These reforms align with the UK’s broader strategy to integrate digital assets into its regulatory perimeter. Earlier this year, Chancellor Rachel Reeves affirmed the government’s intent to build a full-scale regime for crypto markets. Starting January 1, 2026, UK crypto firms will also be subject to new tax transparency rules requiring them to report detailed user data for every trade and transfer.

The FCA’s consultation is open to feedback from the public and industry stakeholders until August 2025, giving market participants a rare chance to help shape the future of digital finance regulation in the UK.